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Loans and ACL
 3 Months Ended
Mar. 31, 2024
Receivables [Abstract]  
Loans and ACL Loans and ACL
Loan Composition
The following table provides a detailed listing of our loan portfolio at:
March 31, 2024December 31, 2023
BalancePercent of TotalBalancePercent of Total
Commercial and industrial
Secured$200,940 14.72 %$189,186 14.02 %
Unsecured25,341 1.86 %20,552 1.52 %
Total commercial and industrial226,281 16.58 %209,738 15.54 %
Commercial real estate
Commercial mortgage owner occupied178,158 13.05 %180,636 13.39 %
Commercial mortgage non-owner occupied215,091 15.75 %216,292 16.03 %
Commercial mortgage 1-4 family investor90,812 6.65 %89,208 6.61 %
Commercial mortgage multifamily77,062 5.64 %78,108 5.79 %
Total commercial real estate561,123 41.09 %564,244 41.82 %
Advances to mortgage brokers29,688 2.17 %18,541 1.37 %
Agricultural
Agricultural mortgage67,891 4.97 %69,044 5.12 %
Agricultural other25,804 1.89 %30,950 2.29 %
Total agricultural93,695 6.86 %99,994 7.41 %
Residential real estate
Senior lien312,692 22.90 %313,459 23.23 %
Junior lien6,773 0.50 %5,945 0.44 %
Home equity lines of credit37,193 2.72 %37,014 2.74 %
Total residential real estate356,658 26.12 %356,418 26.41 %
Consumer
Secured - direct37,496 2.75 %37,948 2.81 %
Secured - indirect57,396 4.20 %59,324 4.40 %
Unsecured3,171 0.23 %3,256 0.24 %
Total consumer98,063 7.18 %100,528 7.45 %
Total$1,365,508 100.00 %$1,349,463 100.00 %
We grant commercial, agricultural, residential real estate, and consumer loans to customers situated primarily in Bay, Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw counties in Michigan. The ability of the borrowers to honor their repayment obligations is often dependent upon the real estate, agricultural, manufacturing, retail, gaming, tourism, health care, higher education, and general economic conditions of this region. Substantially all of our consumer and residential real estate loans are secured by various items of property, while commercial loans are secured primarily by real estate, business assets, and personal guarantees. A portion of loans are unsecured.
Loans that we have the intent and ability to hold in our portfolio are reported at their outstanding principal balance adjusted for any charge-offs, the ACL, and deferred fees or costs. Unless a loan has a nonaccrual status, interest income is accrued over the term of the loan based on the principal amount outstanding. Loan origination fees and certain direct loan origination costs are capitalized and recognized as a component of interest income over the term of the loan using the appropriate amortization method.
Commercial and agricultural loans include loans for commercial real estate, commercial operating loans, advances to mortgage brokers, farmland and agricultural production, and loans to states and political subdivisions. Repayment of these loans is dependent upon the successful operation and management of a business. We minimize our risk by limiting the amount of direct credit exposure to any one borrower to $18,000. Borrowers with direct credit needs of more than $18,000 may be serviced through the use of loan participations with other commercial banks. Commercial and agricultural real estate loans commonly require loan-to-value limits of 80% or less. Depending upon the type of loan, past credit history, and current operating results, we may require the borrower to pledge accounts receivable, inventory, property, or equipment. Government agency guarantee may be required. Personal guarantees and/or life insurance beneficiary assignments are generally required from the owners of closely held corporations, partnerships, and sole proprietorships. In addition, we may require annual financial statements, prepare cash flow analyses, and review credit reports.
We offer adjustable rate mortgages, construction loans, and fixed rate residential real estate loans which have amortization periods up to a maximum of 30 years. We consider the anticipated direction of interest rates, balance sheet duration, the sensitivity of our balance sheet to changes in interest rates, our liquidity needs, and overall loan demand to determine whether or not to sell fixed rate loans to Freddie Mac.
Our lending policies generally limit the maximum loan-to-value ratio on residential real estate loans to 100% of the lower of the appraised value of the property or the purchase price. Private mortgage insurance is typically required on loans with loan-to-value ratios in excess of 80% unless the loan qualifies for government guarantees.
Underwriting criteria for originated residential real estate loans generally include:
•Evaluation of the borrower’s ability to make monthly payments.
•Evaluation of the value of the property securing the loan.
•Ensuring the payment of principal, interest, taxes, and hazard insurance generally does not exceed 28% of a borrower’s gross income.
•Ensuring all debt servicing does not exceed 40% of income.
•Verification of acceptable credit reports.
•Verification of employment, income, and financial information.
Appraisals are performed by independent appraisers and are reviewed for appropriateness. Generally, mortgage loan requests are reviewed by our mortgage loan committee or through a secondary market underwriting system; loans in excess of $1,000 require the approval of one or more of the following committees: Internal Loan Committee, the Executive Loan Committee, or the Board of Directors.
Consumer loans include secured and unsecured personal loans. Loans are amortized for a period of up to 15 years based on the age and value of the underlying collateral. The underwriting emphasis is on a borrower’s perceived intent and ability to pay rather than collateral value. No consumer loans are sold to the secondary market.
Nonaccrual and Past Due Loans
The accrual of interest on commercial and agricultural loans, as well as residential real estate loans, is discontinued at the time a loan is 90 days or more past due unless the credit is well-secured and in the process of short-term collection. Upon transferring a loan to nonaccrual status, we perform an evaluation to determine the net realizable value of the underlying collateral. This evaluation is used to help determine if a charge-off is necessary. Consumer loans are typically charged-off no later than 180 days past due. Past due status is based on the contractual term of the loan. In all cases, a loan is placed in nonaccrual status at an earlier date if collection of principal or interest is considered doubtful.
When a loan is placed in nonaccrual status, all interest accrued in the current calendar year, but not collected, is reversed against interest income while interest accrued in prior calendar years, but not collected, is charged against the ACL. Loans may be returned to accrual status after six months of continuous performance and achievement of current payment status.
The following table summarizes nonaccrual loan data by class of loans as of:
 March 31, 2024December 31, 2023
 Total Nonaccrual LoansNonaccrual Loans with No ACLTotal Nonaccrual LoansNonaccrual Loans with No ACL
Commercial and industrial:
Secured$567 $292 $491 $435 
Commercial real estate:
Commercial mortgage owner occupied234 160 — — 
Agricultural:
Agricultural mortgage22 22 38 38 
Agricultural other167 167 167 167 
Residential real estate:
Senior lien293 293 286 286 
Total$1,283 $934 $982 $926 
The following tables summarize the past due and current loans for the entire loan portfolio as of:
 March 31, 2024
 Past Due:  Accruing Loans 90 or More Days Past Due
30-59
Days		60-89
Days		90 Days
or More		CurrentTotal
Commercial and industrial
Secured$683 $92 $407 $199,758 $200,940 $— 
Unsecured— — — 25,341 25,341 — 
Total commercial and industrial683 92 407 225,099 226,281 — 
Commercial real estate
Commercial mortgage owner occupied701 234 — 177,223 178,158 — 
Commercial mortgage non-owner occupied2,421 — — 212,670 215,091 — 
Commercial mortgage 1-4 family investor— — — 90,812 90,812 — 
Commercial mortgage multifamily— — — 77,062 77,062 — 
Total commercial real estate3,122 234 — 557,767 561,123 — 
Advances to mortgage brokers— — — 29,688 29,688 — 
Agricultural
Agricultural mortgage— — — 67,891 67,891 — 
Agricultural other28 — — 25,776 25,804 — 
Total agricultural28 — — 93,667 93,695 — 
Residential real estate
Senior lien4,084 7 — 308,601 312,692 — 
Junior lien20 — — 6,753 6,773 — 
Home equity lines of credit47 — — 37,146 37,193 — 
Total residential real estate4,151 7 — 352,500 356,658 — 
Consumer
Secured - direct55 — — 37,441 37,496 — 
Secured - indirect127 — — 57,269 57,396 — 
Unsecured5 — — 3,166 3,171 — 
Total consumer187 — — 97,876 98,063 — 
Total$8,171 $333 $407 $1,356,597 $1,365,508 $— 
 December 31, 2023
 Past Due:  Accruing Loans 90 or More Days Past Due
30-59
Days		60-89
Days		90 Days
or More		CurrentTotal
Commercial and industrial
Secured$165 $290 $201 $188,530 $189,186 $— 
Unsecured— — — 20,552 20,552 — 
Total commercial and industrial165 290 201 209,082 209,738 — 
Commercial real estate
Commercial mortgage owner occupied— — — 180,636 180,636 — 
Commercial mortgage non-owner occupied— — — 216,292 216,292 — 
Commercial mortgage 1-4 family investor— — — 89,208 89,208 — 
Commercial mortgage multifamily— — — 78,108 78,108 — 
Total commercial real estate— — — 564,244 564,244 — 
Advances to mortgage brokers— — — 18,541 18,541 — 
Agricultural
Agricultural mortgage— — — 69,044 69,044 — 
Agricultural other— — — 30,950 30,950 — 
Total agricultural— — — 99,994 99,994 — 
Residential real estate
Senior lien3,188 349 201 309,721 313,459 87 
Junior lien— — — 5,945 5,945 — 
Home equity lines of credit— — — 37,014 37,014 — 
Total residential real estate3,188 349 201 352,680 356,418 87 
Consumer
Secured - direct3 — — 37,945 37,948 — 
Secured - indirect181 — — 59,143 59,324 — 
Unsecured9 — — 3,247 3,256 — 
Total consumer193 — — 100,335 100,528 — 
Total$3,546 $639 $402 $1,344,876 $1,349,463 $87 
Credit Quality Indicators
The following tables display commercial and agricultural loans by credit risk ratings and year of origination as of:
 March 31, 2024
20242023202220212020PriorRevolving
Loans		Revolving Loans Converted to TermTotal
Commercial and industrial: Secured
Risk ratings 1-3$662 $19,868 $4,473 $6,069 $6,286 $865 $9,260 $— $47,483 
Risk rating 414,523 38,158 32,961 18,951 3,675 3,876 29,694 — 141,838 
Risk rating 52,425 292 314 217 114 100 1,771 — 5,233 
Risk rating 6— — 2,160 — 194 107 3,358 — 5,819 
Risk rating 7— 389 — — 178 — — — 567 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$17,610 $58,707 $39,908 $25,237 $10,447 $4,948 $44,083 $— $200,940 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial and industrial: Unsecured
Risk ratings 1-3$— $1,850 $203 $114 $48 $714 $4,969 $— $7,898 
Risk rating 41,755 3,835 2,563 476 448 — 8,296 — 17,373 
Risk rating 5— — 29 — — — 41 — 70 
Risk rating 6— — — — — — — — — 
Risk rating 7— — — — — — — — — 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$1,755 $5,685 $2,795 $590 $496 $714 $13,306 $— $25,341 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial real estate: Owner occupied
Risk ratings 1-3$129 $3,681 $1,684 $12,472 $14,060 $3,518 $434 $— $35,978 
Risk rating 42,749 12,054 31,967 36,182 12,673 31,487 1,212 — 128,324 
Risk rating 5199 623 1,475 2,678 694 5,369 372 — 11,410 
Risk rating 6— 823 — 858 — 531 — — 2,212 
Risk rating 7— — — — 234 — — — 234 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$3,077 $17,181 $35,126 $52,190 $27,661 $40,905 $2,018 $— $178,158 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial real estate: Non-owner occupied
Risk ratings 1-3$339 $63 $4,340 $6,428 $761 $1,897 $— $— $13,828 
Risk rating 4214 37,117 63,177 37,162 11,346 40,046 1,673 — 190,735 
Risk rating 5— — 228 5,787 — 3,437 — — 9,452 
Risk rating 6— 1,023 — — 53 — — — 1,076 
Risk rating 7— — — — — — — — — 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$553 $38,203 $67,745 $49,377 $12,160 $45,380 $1,673 $— $215,091 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
March 31, 2024
20242023202220212020PriorRevolving
Loans		Revolving Loans Converted to TermTotal
Commercial real estate: 1-4 family investor
Risk ratings 1-3$208 $284 $1,181 $846 $889 $1,221 $1,414 $— $6,043 
Risk rating 43,973 13,272 11,329 30,174 14,807 4,815 5,159 — 83,529 
Risk rating 5— 150 351 76 — 54 — — 631 
Risk rating 6— 551 — — — 58 — — 609 
Risk rating 7— — — — — — — — — 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$4,181 $14,257 $12,861 $31,096 $15,696 $6,148 $6,573 $— $90,812 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial real estate: Multifamily
Risk ratings 1-3$— $4,196 $4,589 $2,018 $562 $1,480 $— $— $12,845 
Risk rating 4— 2,564 19,300 15,817 801 21,591 795 — 60,868 
Risk rating 5— — — — — — — — — 
Risk rating 6— — — 29 — 3,320 — — 3,349 
Risk rating 7— — — — — — — — — 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$— $6,760 $23,889 $17,864 $1,363 $26,391 $795 $— $77,062 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Advances to mortgage brokers
Risk ratings 1-3$29,688 $— $— $— $— $— $— $— $29,688 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Agricultural mortgage
Risk ratings 1-3$— $293 $2,822 $1,209 $2,628 $1,341 $6 $— $8,299 
Risk rating 41,353 5,033 11,379 8,802 5,809 9,681 1,049 — 43,106 
Risk rating 5228 527 5,366 5,777 683 790 674 — 14,045 
Risk rating 6— 837 — — — 1,582 — — 2,419 
Risk rating 7— — — — — 22 — — 22 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$1,581 $6,690 $19,567 $15,788 $9,120 $13,416 $1,729 $— $67,891 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Agricultural other
Risk ratings 1-3$249 $649 $62 $109 $37 $325 $1,127 $— $2,558 
Risk rating 4423 1,380 2,359 2,123 551 93 10,901 — 17,830 
Risk rating 5— 50 6 73 499 480 2,938 — 4,046 
Risk rating 6— 472 — 117 — — 614 — 1,203 
Risk rating 7— — — — — — 167 — 167 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$672 $2,551 $2,427 $2,422 $1,087 $898 $15,747 $— $25,804 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
December 31, 2023
 20232022202120202019PriorRevolving
Loans		Revolving Loans Converted to TermTotal
Commercial and industrial: Secured
Risk ratings 1-3$15,061 $4,324 $6,188 $6,666 $422 $449 $12,305 $— $45,415 
Risk rating 438,680 35,245 22,065 4,523 2,469 1,762 29,826 — 134,570 
Risk rating 5391 2,634 233 305 111 101 1,994 — 5,769 
Risk rating 6— — 4 207 6 128 2,596 — 2,941 
Risk rating 7465 — — 24 2 — — — 491 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$54,597 $42,203 $28,490 $11,725 $3,010 $2,440 $46,721 $— $189,186 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial and industrial: Unsecured
Risk ratings 1-3$2,200 $259 $129 $71 $96 $707 $1,663 $— $5,125 
Risk rating 43,988 3,117 517 470 — — 7,274 — 15,366 
Risk rating 5— 31 — — — — 30 — 61 
Risk rating 6— — — — — — — — — 
Risk rating 7— — — — — — — — — 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$6,188 $3,407 $646 $541 $96 $707 $8,967 $— $20,552 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial real estate: Owner occupied
Risk ratings 1-3$3,592 $1,712 $12,655 $14,228 $761 $3,313 $211 $— $36,472 
Risk rating 412,148 33,392 39,406 14,086 13,384 19,942 1,506 — 133,864 
Risk rating 51,460 727 195 220 3,829 1,761 464 — 8,656 
Risk rating 6— — 870 234 — 540 — — 1,644 
Risk rating 7— — — — — — — — — 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$17,200 $35,831 $53,126 $28,768 $17,974 $25,556 $2,181 $— $180,636 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial real estate: Non-owner occupied
Risk ratings 1-3$67 $4,383 $6,496 $827 $172 $1,766 $— $— $13,711 
Risk rating 437,906 62,979 37,583 11,534 7,589 32,941 1,650 — 192,182 
Risk rating 5— — 5,838 — — 3,478 — — 9,316 
Risk rating 61,029 — — 54 — — — — 1,083 
Risk rating 7— — — — — — — — — 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$39,002 $67,362 $49,917 $12,415 $7,761 $38,185 $1,650 $— $216,292 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
December 31, 2023
20232022202120202019PriorRevolving
Loans		Revolving Loans Converted to TermTotal
Commercial real estate: 1-4 family investor
Risk ratings 1-3$286 $1,445 $864 $905 $666 $887 $1,352 $— $6,405 
Risk rating 413,492 11,641 30,604 15,124 3,036 3,111 4,538 — 81,546 
Risk rating 5152 354 77 — 55 — — — 638 
Risk rating 6555 — — — 59 5 — — 619 
Risk rating 7— — — — — — — — — 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$14,485 $13,440 $31,545 $16,029 $3,816 $4,003 $5,890 $— $89,208 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial real estate: Multifamily
Risk ratings 1-3$4,509 $4,682 $2,053 $568 $— $1,515 $— $— $13,327 
Risk rating 42,792 19,465 15,981 813 549 21,263 554 — 61,417 
Risk rating 5— — — 4 — — — — 4 
Risk rating 6— — 32 — — 3,328 — — 3,360 
Risk rating 7— — — — — — — — — 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$7,301 $24,147 $18,066 $1,385 $549 $26,106 $554 $— $78,108 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Advances to mortgage brokers
Risk ratings 1-3$18,541 $— $— $— $— $— $— $— $18,541 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Agricultural mortgage
Risk ratings 1-3$292 $2,834 $1,241 $2,786 $604 $964 $94 $— $8,815 
Risk rating 45,622 12,903 8,970 5,940 3,926 7,883 566 — 45,810 
Risk rating 5126 4,098 5,886 689 175 60 756 — 11,790 
Risk rating 6842 — — — — 1,749 — — 2,591 
Risk rating 7— — — — — 38 — — 38 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$6,882 $19,835 $16,097 $9,415 $4,705 $10,694 $1,416 $— $69,044 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Agricultural other
Risk ratings 1-3$801 $81 $121 $38 $183 $141 $2,659 $— $4,024 
Risk rating 41,830 2,481 2,280 619 146 75 14,405 — 21,836 
Risk rating 5753 8 163 507 — 480 2,731 — 4,642 
Risk rating 6— — 32 — — — 249 — 281 
Risk rating 7— — — — — — 167 — 167 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$3,384 $2,570 $2,596 $1,164 $329 $696 $20,211 $— $30,950 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Internally assigned credit risk ratings are reviewed, at a minimum, when loans are renewed or when management has knowledge of improvements or deterioration of the credit quality of individual credits. Descriptions of the internally assigned credit risk ratings for commercial and agricultural loans are as follows:
1. EXCELLENT – Substantially Risk Free
Credit has strong financial condition and solid earnings history, characterized by:
•High liquidity, strong cash flow, low leverage.
•Unquestioned ability to meet all obligations when due.
•Experienced management, with management succession in place.
•Secured by cash.
2. HIGH QUALITY – Limited Risk
Credit with sound financial condition and a positive trend in earnings supplemented by:
•Favorable liquidity and leverage ratios.
•Ability to meet all obligations when due.
•Management with successful track record.
•Steady and satisfactory earnings history.
•If loan is secured, collateral is of high quality and readily marketable.
•Access to alternative financing.
•Well defined primary and secondary source of repayment.
•If supported by guaranty, the financial strength and liquidity of the guarantor(s) are clearly evident.
3. HIGH SATISFACTORY – Reasonable Risk
Credit with satisfactory financial condition and further characterized by:
•Working capital adequate to support operations.
•Cash flow sufficient to pay debts as scheduled.
•Management experience and depth appear favorable.
•Loan performing according to terms.
•If loan is secured, collateral is acceptable and loan is fully protected.
4. LOW SATISFACTORY – Acceptable Risk
Credit with bankable risks, although some signs of weaknesses are shown:
•Would include most start-up businesses.
•Occasional instances of trade slowness or repayment delinquency – may have been 10-30 days slow within the past year.
•Management’s abilities are apparent yet unproven.
•Weakness in primary source of repayment with adequate secondary source of repayment.
•Loan structure generally in accordance with policy.
•If secured, loan collateral coverage is marginal.
To be classified as less than satisfactory, only one of the following criteria must be met.
5. SPECIAL MENTION – Criticized
Credit constitutes an undue and unwarranted credit risk but not to the point of justifying a classification of substandard. The credit risk may be relatively minor yet constitutes an unwarranted risk in light of the circumstances surrounding a specific loan:
•Downward trend in sales, profit levels, and margins.
•Impaired working capital position.
•Cash flow is strained in order to meet debt repayment.
•Loan delinquency (30-60 days) and overdrafts may occur.
•Shrinking equity cushion.
•Diminishing primary source of repayment and questionable secondary source.
•Management abilities are questionable.
•Weak industry conditions.
•Litigation pending against the borrower.
•Loan may need to be restructured to improve collateral position or reduce payments.
•Collateral or guaranty offers limited protection.
•Negative debt service coverage, however the credit is well collateralized and payments are current.
6. SUBSTANDARD – Classified
Credit is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged. There is a distinct possibility we will implement collection procedures if the loan deficiencies are not corrected. Any commercial loan placed in nonaccrual status will be rated “7” or worse. In addition, the following characteristics may apply:
•Sustained losses have severely eroded the equity and cash flow.
•Deteriorating liquidity.
•Serious management problems or internal fraud.
•Original repayment terms liberalized.
•Likelihood of bankruptcy.
•Inability to access other funding sources.
•Reliance on secondary source of repayment.
•Litigation filed against borrower.
•Interest non-accrual may be warranted.
•Collateral provides little or no value.
•Requires excessive attention of the loan officer.
•Borrower is uncooperative with loan officer.
7. VULNERABLE – Classified
Credit is considered “Substandard” and warrants placing in nonaccrual status. Risk of loss is being evaluated and exit strategy options are under review. Other characteristics that may apply:
•Insufficient cash flow to service debt.
•Minimal or no payments being received.
•Limited options available to avoid the collection process.
•Transition status, expect action will take place to collect loan without immediate progress being made.
8. DOUBTFUL – Workout
Credit has all the weaknesses inherent in a “Substandard” loan with the added characteristic that collection and/or liquidation is pending. The possibility of a loss is extremely high, but its classification as a loss is deferred until liquidation procedures are completed, or reasonably estimable. Other characteristics that may apply:
•Normal operations are severely diminished or have ceased.
•Seriously impaired cash flow.
•Original repayment terms materially altered.
•Secondary source of repayment is inadequate.
•Survivability as a “going concern” is impossible.
•Collection process has begun.
•Bankruptcy petition has been filed.
•Judgments have been filed.
•Portion of the loan balance has been charged-off.
9. LOSS – Charge-off
Credit is considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification is for charged-off loans but does not mean that the asset has absolutely no recovery or salvage value. These loans are further characterized by:
•Liquidation or reorganization under bankruptcy, with poor prospects of collection.
•Fraudulently overstated assets and/or earnings.
•Collateral has marginal or no value.
•Debtor cannot be located.
•Over 120 days delinquent.
Our primary credit quality indicator for residential real estate and consumer loans is the individual loan’s past due status. The following tables display residential real estate and consumer loans by payment status and year of origination as of:
March 31, 2024
 20242023202220212020PriorRevolving
Loans		Revolving Loans Converted to TermTotal
Residential real estate: Senior lien
Current$7,411 $44,777 $51,875 $78,773 $51,642 $74,002 $— $— $308,480 
Past due 30-89 days— 121 861 897 280 1,760 — — 3,919 
Past due 90 or more days— — — — — — — — — 
Nonaccrual— 46 — — 30 217 — — 293 
Total$7,411 $44,944 $52,736 $79,670 $51,952 $75,979 $— $— $312,692 
Current year-to-date gross charge-offs$— $— $— $— $— $1 $— $— $1 
Residential real estate: Junior lien
Current$1,072 $3,757 $1,131 $140 $126 $527 $— $— $6,753 
Past due 30-89 days— — — 20 — — — — 20 
Past due 90 or more days— — — — — — — — — 
Nonaccrual— — — — — — — — — 
Total$1,072 $3,757 $1,131 $160 $126 $527 $— $— $6,773 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Residential real estate: Home equity lines of credit
Current$— $— $— $— $— $— $37,146 $— $37,146 
Past due 30-89 days— — — — — — 47 — 47 
Past due 90 or more days— — — — — — — — — 
Nonaccrual— — — — — — — — — 
Total$— $— $— $— $— $— $37,193 $— $37,193 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Consumer: Secured - direct
Current$3,921 $12,504 $9,223 $5,861 $3,102 $2,830 $— $— $37,441 
Past due 30-89 days1 19 9 — 12 14 — — 55 
Past due 90 or more days— — — — — — — — — 
Nonaccrual— — — — — — — — — 
Total$3,922 $12,523 $9,232 $5,861 $3,114 $2,844 $— $— $37,496 
Current year-to-date gross charge-offs$— $62 $— $— $— $— $— $— $62 
Consumer: Secured - indirect
Current$2,151 $28,849 $10,271 $6,407 $5,026 $4,565 $— $— $57,269 
Past due 30-89 days— 78 — — 40 9 — — 127 
Past due 90 or more days— — — — — — — — — 
Nonaccrual— — — — — — — — — 
Total$2,151 $28,927 $10,271 $6,407 $5,066 $4,574 $— $— $57,396 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
March 31, 2024
20242023202220212020PriorRevolving
Loans		Revolving Loans Converted to TermTotal
Consumer: Unsecured
Current$442 $1,260 $572 $91 $59 $4 $738 $— $3,166 
Past due 30-89 days— — 5 — — — — — 5 
Past due 90 or more days— — — — — — — — — 
Nonaccrual— — — — — — — — — 
Total$442 $1,260 $577 $91 $59 $4 $738 $— $3,171 
Current year-to-date gross charge-offs$107 $7 $14 $— $— $— $— $— $128 
December 31, 2023
20232022202120202019PriorRevolving
Loans		Revolving Loans Converted to TermTotal
Residential real estate: Senior lien
Current$45,878 $52,989 $80,122 $52,648 $23,356 $54,556 $— $— $309,549 
Past due 30-89 days— 784 714 123 478 1,438 — — 3,537 
Past due 90 or more days— — — — — 87 — — 87 
Nonaccrual48 — — 31 — 207 — — 286 
Total$45,926 $53,773 $80,836 $52,802 $23,834 $56,288 $— $— $313,459 
Current year-to-date gross charge-offs$— $— $— $— $— $— $2 $— $2 
Residential real estate: Junior lien
Current$3,706 $1,325 $168 $134 $167 $445 $— $— $5,945 
Past due 30-89 days— — — — — — — — — 
Past due 90 or more days— — — — — — — — — 
Nonaccrual— — — — — — — — — 
Total$3,706 $1,325 $168 $134 $167 $445 $— $— $5,945 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Residential real estate: Home equity lines of credit
Current$— $— $— $— $— $— $37,014 $— $37,014 
Past due 30-89 days— — — — — — — — — 
Past due 90 or more days— — — — — — — — — 
Nonaccrual— — — — — — — — — 
Total$— $— $— $— $— $— $37,014 $— $37,014 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Consumer: Secured - direct
Current$14,813 $10,037 $6,468 $3,473 $1,682 $1,472 $— $— $37,945 
Past due 30-89 days— — — 3 — — — — 3 
Past due 90 or more days— — — — — — — — — 
Nonaccrual— — — — — — — — — 
Total$14,813 $10,037 $6,468 $3,476 $1,682 $1,472 $— $— $37,948 
Current year-to-date gross charge-offs$— $— $5 $— $— $— $— $— $5 
 December 31, 2023
20232022202120202019PriorRevolving
Loans		Revolving Loans Converted to TermTotal
Consumer: Secured - indirect
Current$30,900 $10,977 $6,887 $5,376 $2,030 $2,973 $— $— $59,143 
Past due 30-89 days123 — — 30 3 25 — — 181 
Past due 90 or more days— — — — — — — — — 
Nonaccrual— — — — — — — — — 
Total$31,023 $10,977 $6,887 $5,406 $2,033 $2,998 $— $— $59,324 
Current year-to-date gross charge-offs$— $— $— $— $— $— $— $— $— 
Consumer: Unsecured
Current$1,576 $740 $144 $86 $7 $— $694 $— $3,247 
Past due 30-89 days— 9 — — — — — — 9 
Past due 90 or more days— — — — — — — — — 
Nonaccrual— — — — — — — — — 
Total$1,576 $749 $144 $86 $7 $— $694 $— $3,256 
Current year-to-date gross charge-offs$91 $— $3 $— $— $— $— $— $94 
Loan Modifications
A loan modification includes terms outside of normal lending practices to a borrower experiencing financial difficulty.
Typical modifications granted include, but are not limited to:
•Agreeing to interest rates below prevailing market rates for debt with similar risk characteristics.
•Extending the maturity date or amortization period beyond typical lending guidelines for loans with similar risk characteristics.
•Agreeing to an interest-only payment structure, delaying principal payments, or delaying payments.
•Forgiving principal.
To determine if a borrower is experiencing financial difficulty, factors we consider include:
•The borrower is currently in default on any debt.
•The borrower would likely default on any debt if the concession is not granted.
•The borrower’s cash flow is insufficient to service all debt if the concession is not granted.
•The borrower has declared, or is in the process of declaring, bankruptcy.
•The borrower is unlikely to continue as a going concern (if the entity is a business).
The following is a summary of the amortized cost basis of loan modifications granted to borrowers experiencing financial difficulty for the:
Three Months Ended March 31, 2024
Other-Than-Insignificant Payment DelayTerm Extension
 Amortized Cost Basis% of Total Class of Financial ReceivableAmortized Cost Basis% of Total Class of Financial Receivable
Commercial and industrial
Secured$— — %$13 0.01 %
Commercial real estate
Commercial mortgage owner occupied823 0.46 %— — %
Consumer
Secured - indirect— — %2 — %
Total$823 $15 
Three Months Ended March 31, 2023
Term Extension
 Amortized Cost Basis% of Total Class of Financial Receivable
Agricultural
Agricultural mortgage$232 0.33 %
Agricultural other34 0.14 %
Residential real estate
Senior lien5 — %
Total$271 
We do not modify any loans by forgiving principal or accrued interest. We had committed to advance $0 in additional funds to be disbursed in connection with modified loans at March 31, 2024 and 2023, as displayed in the tables above.
The following is a summary of the financial effect of the modifications granted to borrowers experiencing financial difficulty for the:
Three Months Ended March 31
20242023
Payment Delay TermWeighted-Average Term Extension (Years)Weighted-Average Term Extension (Years)
Commercial and industrial
SecuredN/A3 yearsN/A
Commercial real estate
Commercial mortgage owner occupied7 monthsN/AN/A
Agricultural
Agricultural mortgageN/AN/A1 year
Agricultural otherN/AN/A1 year
Residential real estate
Senior lienN/AN/A2.6 years
Consumer
Secured - indirectN/A1.3 yearsN/A
We closely monitor the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of our modification efforts. The following tables summarize the performance of such loans that were modified during the three-month periods ended March 31, 2024 and 2023:
 March 31, 2024
Past Due:
30-59 Days60-89 Days90 Days or MoreTotal Past Due
Commercial and industrial
Secured$— $— $— $— 
Commercial real estate
Commercial mortgage owner occupied— — — — 
Consumer
Secured - indirect— — — — 
Total$— $— $— $— 
 March 31, 2023
Past Due:
30-59 Days60-89 Days90 Days or MoreTotal Past Due
Agricultural
Agricultural mortgage$— $— $— $— 
Agricultural other— — — — 
Residential real estate
Senior lien— — — — 
Total$— $— $— $— 
We had no loans that defaulted in the three-month periods ended March 31, 2024 and 2023 which were modified within 12 months prior to the default date.
ACL - Loans
The credit quality of our loan portfolio is continuously monitored and is reflected within the ACL for loans. The ACL is an estimate of expected losses inherent within our loan portfolio. The ACL is adjusted by a credit loss expense, which is reported in earnings, and reduced by the charge-off of loan amounts, net of recoveries.
The ACL is evaluated on a regular basis for appropriateness. Our periodic review of the collectability of a loan considers historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
The primary factors behind the determination of the level of the ACL are specific allocations for loans individually evaluated, historical loss percentages, delinquency status, and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. In future periods evaluations of the overall loan portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense in those future periods.
The methodology for estimating the amount of expected credit losses reported in the ACL has two basic components: a component of individual loans that do not share risk characteristics with other loans; and a pooled component for estimated expected credit losses for pools of loans that share similar risk characteristics.
For a loan that does not share risk characteristics with other loans, an individual analysis is performed to measure an allowance. Loans in nonaccrual status are individually evaluated for specific allocation of the allowance using the fair value of collateral, less costs to sell if foreclosure is probable, or the discounted cash flow method. We do not recognize interest income on loans in nonaccrual status. For loans not classified as nonaccrual, interest income is recognized daily, as earned, according to the terms of the loan agreement and the principal amount outstanding.
In determining the allowance for credit losses, we derive an estimated credit loss assumption from a model that categorizes loan pools based on loan type and credit risk ratings or delinquency bucket. This model calculates an expected loss percentage for each loan class by considering the probability of default, based on the migration of loans from performing to loss by credit risk ratings or delinquency buckets using life-of-loan analysis, and the historical severity of loss, based on the aggregate net lifetime losses incurred per loan class.
The default and severity factors used to calculate the allowance for credit losses for loans that share similar risk characteristics with other loans are adjusted for differences between the historical period used to calculate historical default and loss severity rates and expected conditions over the remaining lives of the loans in the portfolio. These qualitative factors are used to adjust the historical probabilities of default and severity of loss so that they reflect management's expectation of future conditions based on a reasonable and supportable forecast. To the extent the lives of the loans in the portfolio extend beyond the period for which a reasonable and supportable forecast can be made, the model reverts back to the historical rates of default and severity of loss. Qualitative factors include:
•Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, recovery practices not considered elsewhere in estimating credit losses;
•Changes in the experience, ability, and depth of lending management and other relevant staff;
•Changes in interest rates;
•Changes in international, national, regional, and local economic factors (international, national, regional, and local);
•Changes in the nature and volume of the portfolio and in the terms of loans;
•Changes in the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans;
•Lack of current financial information;
•Competition, legal, and regulatory; and
•Changes in the value of underlying collateral.
A summary of activity in the ACL by portfolio segment and the recorded investment in loans by segments follows for the:
Three Months Ended March 31, 2024
Commercial and IndustrialCommercial Real EstateAgriculturalResidential Real EstateConsumerTotal
January 1, 2024$968 $5,878 $270 $4,336 $1,656 $13,108 
Charge-offs— — — (1)(190)(191)
Recoveries2 6 2 64 71 145 
Credit loss expense297 19 (7)(91)110 328 
March 31, 2024$1,267 $5,903 $265 $4,308 $1,647 $13,390 
Three Months Ended March 31, 2023
Commercial and IndustrialCommercial Real EstateAgriculturalResidential Real EstateConsumerUnallocatedTotal
January 1, 2023$860 $461 $577 $617 $961 $6,374 $9,850 
Impact of the adoption of ASC 326(58)5,532 (247)3,535 356 (6,374)2,744 
Charge-offs— — — (2)(99)— (101)
Recoveries— 10 4 24 72 — 110 
Credit loss expense15 33 (69)(61)119 — 37 
March 31, 2023$817 $6,036 $265 $4,113 $1,409 $— $12,640 
The following table presents loans that were evaluated for expected credit losses on an individual basis and the related specific allocations, by loan segment as of:
 March 31, 2024December 31, 2023
Loan BalanceSpecific AllocationLoan BalanceSpecific Allocation
Commercial and industrial$550 $275 $465 $56 
Commercial real estate234 74 234 28 
Agricultural167 — 181 — 
Residential real estate217 — 203 — 
Consumer— — — — 
Total$1,168 $349 $1,083 $84 
We have designated loans classified as collateral dependent for which we apply the practical expedient to measure the ACL based on the fair value of the collateral less cost to sell, when the repayment is expected to be provided substantially by the sale or operation of the collateral and the borrower is experiencing financial difficulty. The fair value of the collateral is based on appraisals, which may be adjusted due to their age, and the type, location, and condition of the property or area or general market conditions to reflect the expected change in value between the effective date of the appraisal and the measurement date. Appraisals are updated every one to two years depending on the type of loan and the total exposure of the borrower. Loans evaluated for expected credit losses on an individual basis include $1,168 in collateral dependent loans.