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LOANS AND ALLOWANCE FOR CREDIT LOSSES
 9 Months Ended
Sep. 30, 2023
Receivables [Abstract]  
LOANS AND ALLOWANCE FOR CREDIT LOSSES LOANS AND ALLOWANCE FOR CREDIT LOSSES
Portfolio Segments:
    Commercial and agricultural real estate loans are underwritten after evaluating and understanding the borrower's ability to operate profitably and prudently expand its business. Management examines current and projected cash flows to determine the ability of the borrower to repay its obligations as agreed. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally largely dependent on the successful operation of the property or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The level of owner-occupied property versus non-owner-occupied property are tracked and monitored on a regular basis. Agricultural real estate loans are primarily comprised of loans for the purchase of farmland. Loan-to-value ratios on loans secured by farmland generally do not exceed 75%.
Commercial and industrial (“C&I”) loans are primarily underwritten based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. These cash flows, however, may not be as expected and the value of collateral securing the loans may fluctuate. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee. Agricultural operating loans are generally comprised of term loans to fund the purchase of equipment, livestock and seasonal operating lines. Operating lines are typically written for one year and secured by the crop and other farm assets or other business assets, as considered necessary. Agricultural loans carry significant credit risks as they may involve larger balances concentrated with single borrowers or groups of related borrowers. In addition, repayment of such loans depends on the successful operation or management of the farm property securing the loan or for which an operating loan is utilized. Farming operations may be affected by adverse weather conditions such as drought, hail or floods that can severely limit crop yields.
Residential mortgage loans are collateralized by primary and secondary positions on real estate and are underwritten primarily based on borrower’s documented income, credit scores, and collateral values. Under consumer home equity loan guidelines, the borrower will be approved for a loan based on a percentage of their home’s appraised value less the balance owed on the existing first mortgage. Credit risk is minimized within the residential mortgage portfolio due to relatively small loan account balances spread across many individual borrowers. Management evaluates trends in past due loans and current economic factors such as the housing price index on a regular basis.
Consumer installment loans are comprised of originated indirect paper loans secured primarily by boats and recreational vehicles and other consumer loans secured primarily by automobiles and other personal assets. Consumer loan underwriting terms often depend on the collateral type, debt to income ratio and the borrower’s creditworthiness as evidenced by their credit score. In the event of a consumer installment loan default, collateral value alone may not provide an adequate source of repayment of the outstanding loan balance. This shortage is a result of the greater likelihood of damage, loss and depreciation for consumer based collateral.
Loans are stated at the principal amount outstanding net of unearned net deferred fees and costs and loans in process, unearned discounts on acquired loans, and allowance for credit losses (“ACL”). Unearned net deferred fees and costs includes deferred loan origination fees reduced by loan origination costs and is amortized to interest income over the life of the related loan using methods that approximated the effective interest rate method. Interest on substantially all loans is credited to income based on the principal amount outstanding. A summary of loans at September 30, 2023 follows:
September 30, 2023
Amortized Cost% of Total
Commercial/Agricultural real estate:
Commercial real estate$748,118 51.7 %
Agricultural real estate84,328 5.8 %
Multi-family real estate219,095 15.1 %
Construction and land development109,041 7.5 %
C&I/Agricultural operating:
Commercial and industrial120,532 8.3 %
Agricultural operating24,571 1.7 %
Residential mortgage:
Residential mortgage125,348 8.7 %
Purchased HELOC loans2,881 0.2 %
Consumer installment:
Originated indirect paper7,175 0.5 %
Other consumer6,440 0.5 %
Total loans receivable$1,447,529 100 %
Less Allowance for credit losses(22,973)
Net loans receivable$1,424,556 
Loans are stated at the unpaid principal balance outstanding at December 31, 2022.
December 31, 2022
Loan Principal Balance% of Total
Commercial/Agricultural real estate:
Commercial real estate$725,971 51.5 %
Agricultural real estate87,908 6.2 %
Multi-family real estate208,908 14.8 %
Construction and land development102,492 7.3 %
C&I/Agricultural operating:
Commercial and industrial136,013 9.6 %
Agricultural operating28,806 2.0 %
Residential mortgage:
Residential mortgage105,389 7.5 %
Purchased HELOC loans3,262 0.2 %
Consumer installment:
Originated indirect paper10,236 0.7 %
Other consumer7,150 0.5 %
Gross Loans$1,416,135 100.3 %
Less:
Unearned net deferred fees and costs and loans in process(2,585)(0.2)%
Unamortized discount on acquired loans(1,766)(0.1)%
Total loans receivable$1,411,784 100.0 %
Less Allowance for loan losses(17,939)
Net loans$1,393,845 
Credit Quality/Risk Ratings:
    Management utilizes a numeric risk rating system to identify and quantify the Bank’s risk of loss within its loan portfolio. Ratings are initially assigned prior to funding the loan, and may be changed at any time as circumstances warrant.
Ratings range from the highest to lowest quality based on factors that include measurements of ability to pay, collateral type and value, borrower stability and management experience. The Bank’s loan portfolio ratings are presented below in accordance with the risk rating framework that has been commonly adopted by the federal banking agencies. The definitions of the various risk rating categories are as follows:
1 through 4 - Pass. A “Pass” loan means that the condition of the borrower and the performance of the loan is satisfactory or better.
5 - Watch. A “Watch” loan has clearly identifiable developing weaknesses that deserve additional attention from management. Weaknesses that are not corrected or mitigated, may jeopardize the ability of the borrower to repay the loan in the future.
6 - Special Mention. A “Special Mention” loan has one or more potential weakness that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position in the future.
7 - Substandard. A “Substandard” loan is inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. Assets classified as substandard must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
8 - Doubtful. A “Doubtful” loan has all the weaknesses inherent in a Substandard loan with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.
9 - Loss. Loans classified as “Loss” are considered uncollectible, and their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, and a partial recovery may occur in the future.
Below is a summary of the amortized cost of loans summarized by class, credit quality risk rating and year of origination as of September 30, 2023 and gross charge-offs for the nine months ended September 30, 2023:



Amortized Cost Basis by Origination Year
20232022202120202019PriorRevolvingRevolving to TermTotal
Commercial/Agricultural real estate:
Commercial real estate
Risk rating 1 to 5$51,379 $141,529 $245,661 $92,071 $72,159 $113,138 $11,866 $— $727,803 
Risk rating 6— — 9,303 — — — — — 9,303 
Risk rating 7— 188 — 4,551 187 6,086 — — 11,012 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$51,379 $141,717 $254,964 $96,622 $72,346 $119,224 $11,866 $— $748,118 
Current period gross charge-offs$— $— $10 $— $— $4 $— $— $14 
Agricultural real estate
Risk rating 1 to 5$16,044 $19,876 $11,362 $7,838 $5,374 $15,786 $1,004 $— $77,284 
Risk rating 6— 172 5,460 — 297 646 — — 6,575 
Risk rating 7— 370 — — 99 — — — 469 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$16,044 $20,418 $16,822 $7,838 $5,770 $16,432 $1,004 $— $84,328 
Current period gross charge-offs$— $— $— $32 $— $— $— $— $32 
Multi-family real estate
Risk rating 1 to 5$3,492 $48,439 $89,513 $46,238 $8,663 $22,715 $35 $— $219,095 
Risk rating 6— — — — — — — — — 
Risk rating 7— — — — — — — — — 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$3,492 $48,439 $89,513 $46,238 $8,663 $22,715 $35 $— $219,095 
Current period gross charge-offs$— $— $— $— $— $— $— $— $— 
Construction and land development
Risk rating 1 to 5$36,366 $34,514 $25,382 $7,308 $119 $825 $4,322 $— $108,836 
Risk rating 6— — — — — 111 — — 111 
Risk rating 7— — — — — 94 — — 94 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$36,366 $34,514 $25,382 $7,308 $119 $1,030 $4,322 $— $109,041 
Current period gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial/Agricultural operating:
Commercial and industrial
Risk rating 1 to 5$13,658 $32,774 $28,294 $12,179 $5,276 $2,537 $22,844 $— $117,562 
Risk rating 6— — — — — — 2,950 — 2,950 
Risk rating 7— — — — — 3 — 17 20 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$13,658 $32,774 $28,294 $12,179 $5,276 $2,540 $25,794 $17 $120,532 
Current period gross charge-offs$— $— $— $— $— $— $— $— $— 
Agricultural operating
Risk rating 1 to 5$3,392 $3,201 $960 $489 $344 $2,303 $11,448 $— $22,137 
Risk rating 692 — 48 345 — — 575 — 1,060 
Risk rating 7— 493 722 — 35 124 — — 1,374 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$3,484 $3,694 $1,730 $834 $379 $2,427 $12,023 $— $24,571 
Current period gross charge-offs$— $— $— $— $— $— $— $— $— 
ContinuedAmortized Cost Basis by Origination Year
20232022202120202019PriorRevolvingRevolving to TermTotal
Residential mortgage:
Residential mortgage
Risk rating 1 to 5$23,434 $34,176 $8,872 $2,644 $2,324 $35,201 $15,670 $— $122,321 
Risk rating 6— — — — — — — — — 
Risk rating 7— — — — 14 2,963 — 50 3,027 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$23,434 $34,176 $8,872 $2,644 $2,338 $38,164 $15,670 $50 $125,348 
Current period gross charge-offs$— $— $10 $— $— $68 $— $— $78 
Purchased HELOC loans
Risk rating 1 to 5$— $— $— $— $— $— $2,881 $— $2,881 
Risk rating 6— — — — — — — — — 
Risk rating 7— — — — — — — — — 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$— $— $— $— $— $— $2,881 $— $2,881 
Current period gross charge-offs$— $— $— $— $— $— $— $— $— 
Consumer installment:
Originated indirect paper
Risk rating 1 to 5$— $— $— $— $— $7,135 $— $— $7,135 
Risk rating 6— — — — — — — — — 
Risk rating 7— — — — — 40 — — 40 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$— $— $— $— $— $7,175 $— $— $7,175 
Current period gross charge-offs$— $— $— $— $— $13 $— $— $13 
Other consumer
Risk rating 1 to 5$1,763 $1,743 $872 $665 $470 $342 $557 $— $6,412 
Risk rating 6— — — — — — — — — 
Risk rating 77 — — — 18 2 1 — 28 
Risk rating 8— — — — — — — — — 
Risk rating 9— — — — — — — — — 
Total$1,770 $1,743 $872 $665 $488 $344 $558 $— $6,440 
Current period gross charge-offs$— $— $1 $11 $2 $3 $— $— $17 
Total loans receivable$149,627 $317,475 $426,449 $174,328 $95,379 $210,051 $74,153 $67 $1,447,529 
Total current period gross charge-offs$— $— $21 $43 $2 $88 $— $— $154 
Below is a summary of the unpaid principal balance of loans summarized by class and credit quality risk rating as of December 31, 2022:
1 to 56789TOTAL
Commercial/Agricultural real estate:
Commercial real estate$712,658 $5,771 $7,542 $— $— $725,971 
Agricultural real estate84,215 549 3,144 — — 87,908 
Multi-family real estate208,908 — — — — 208,908 
Construction and land development102,385 — 107 — — 102,492 
C&I/Agricultural operating:
Commercial and industrial129,748 5,526 739 — — 136,013 
Agricultural operating26,418 324 2,064 — — 28,806 
Residential mortgage:
Residential mortgage101,730 — 3,659 — — 105,389 
Purchased HELOC loans3,262 — — — — 3,262 
Consumer installment:
Originated indirect paper10,190 — 46 — — 10,236 
Other consumer7,132 — 18 — — 7,150 
Gross loans$1,386,646 $12,170 $17,319 $— $— $1,416,135 
Less:
Unearned net deferred fees and costs and loans in process(2,585)
Unamortized discount on acquired loans(1,766)
Allowance for loan losses(17,939)
Loans receivable, net$1,393,845 
Allowance for Credit Losses - Loans- On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial instruments and transitioned to the Current Expected Credit Loss (“CECL”) model to estimate losses based on the lifetime of the loan. Under the new methodology, the ACL is comprised of collectively evaluated and individually evaluated components. The allowance for credit losses (“ACL”) represents the Company’s best estimate of the reserve necessary to adequately account for probable losses expected over the remaining life of the assets. The provision for credit losses is the charge against current earnings that is determined by the Company as the amount needed to maintain an adequate allowance for credit losses. In determining the adequacy of the allowance for credit losses, and therefore the provision to be charged to current earnings, the Company relies predominantly on a disciplined credit review and approval process that extends to the full range of the Company’s credit exposure. The review process is directed by the overall lending policy and is intended to identify, at the earliest possible stage, the borrowers who might be facing financial difficulty. Factors considered by the Company in evaluating the overall adequacy of the allowance include historical net loan losses, the level and composition of nonaccrual, past due and modifications, trends in volumes and terms of loans, effects of changes in risk selection and underwriting standards or lending practices, lending staff changes, concentrations of credit, industry conditions and the current economic conditions in the region where the Company operates. The Company estimates the appropriate level of allowance for credit losses by evaluating loans collectively on a pooled basis when similar risk characteristics exist, and on an individual basis when management determines that a loan does not share similar risk characteristics with other loans.
The following tables present the balance and activity in the allowance for credit losses (“ACL”) - loans by portfolio segment for the three and nine months ended September 30, 2023:

Commercial/Agricultural Real EstateC&I/Agricultural operatingResidential MortgageConsumer InstallmentUnallocatedTotal
Three months ended September 30, 2023
Allowance for Credit Losses - Loans:
ACL - Loans, at beginning of period$18,933 $1,458 $2,452 $321 $— $23,164 
Charge-offs— — (54)(3)— (57)
Recoveries206 10 — 2 — 218 
(Reversals)/additions to ACL - Loans via provision for credit losses charged to operations(284)(279)235 (24)— (352)
ACL - Loans, at end of period$18,855 $1,189 $2,633 $296 $— $22,973 
Commercial/Agricultural Real EstateC&I/Agricultural operatingResidential MortgageConsumer InstallmentUnallocatedTotal
Nine months ended September 30, 2023
Allowance for Credit Losses - Loans:
ACL - Loans, at beginning of period$14,085 $2,318 $599 $129 $808 $17,939 
Cumulative effect of ASU 2016-13 adoption4,510 (331)1,119 216 (808)4,706 
Charge-offs(46)— (78)(30)— (154)
Recoveries236 41 40 24 — 341 
Additions/(reversals) to ACL - Loans via provision for credit losses charged to operations70 (839)953 (43)— 141 
ACL - Loans, at end of period$18,855 $1,189 $2,633 $296 $— $22,973 
Allowance for Credit Losses - Unfunded Commitments - In addition to the ACL - Loans, the Company has established an ACL - Unfunded Commitments of $1,571 at September 30, 2023 and $0 at December 31, 2022, classified in other liabilities on the consolidated balance sheets. The following table presents the balance and activity in the ACL - Unfunded Commitments for the three and nine months ended September 30, 2023.

September 30, 2023 and Three Months EndedSeptember 30, 2023 and Nine Months Ended
ACL - Unfunded Commitments - beginning of period$1,544 $— 
Cumulative effect of ASU 2016-13 adoption— 1,537 
Additions to ACL - Unfunded Commitments via provision for credit losses charged to operations27 34 
ACL - Unfunded Commitments - End of period$1,571 $1,571 

Provision for credit losses - The provision for credit losses is determined by the Company as the amount to be added to the ACL loss accounts for various types of financial instruments (including loans and off-balance sheet credit exposures) after net charge-offs have been deducted to bring the ACL to a level that, in managements judgement, is necessary to absorb expected credit losses over the lives of the respective financial instruments. The following table presents the components of the provision for credit losses.

September 30, 2023 and Three Months EndedSeptember 30, 2023 and Nine Months Ended
Provision for credit losses on:
Loans $(352)$141 
Unfunded Commitments27 34 
Total provision for credit losses$(325)$175 
Allowance for Loan Losses - Prior to the adoption of ASU 2016-13, the Allowance for Loan Losses (“ALL”) represented management’s estimate of probable and inherent credit losses in the Bank’s loan portfolio. Estimating the amount of the ALL required the exercise of significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on pools of homogeneous loans based on historical loss experience, and consideration of other qualitative factors such as current economic trends and conditions, all of which may have been susceptible to significant change.
There were many factors affecting the ALL; some were quantitative, while others required qualitative judgment. The process for determining the ALL (which management believed adequately considered potential factors which resulted in probable credit losses), included subjective elements and, therefore, may have been susceptible to significant change. To the extent actual outcomes differed from management estimates, additional provision for loan losses could have been required that could have adversely affected the Company’s earnings or financial position in future periods. Allocations of the ALL may have been made for specific loans but the entire ALL was available for any loan that, in management’s judgment, should have been charged-off or for which an actual loss was realized.
As an integral part of their examination process, various regulatory agencies also reviewed the Bank’s ALL. Such agencies may have required that changes in the ALL be recognized when such regulators’ credit evaluations differed from those of our management based on information available to the regulators at the time of their examinations.
Changes in the ALL by loan type for the periods presented below were as follows:

Three months ended September 30, 2022Commercial/Agricultural Real EstateC&I/Agricultural operatingResidential MortgageConsumer InstallmentUnallocatedTotal
Allowance for Loan Losses:
Beginning balance, July 1, 2022$12,702 $1,910 $472 $143 $826 $16,053 
Charge-offs— — — (9)— (9)
Recoveries35 8 1 27 — 71 
Provision380 7 10 (38)217 576 
Total allowance on originated loans13,117 1,925 483 123 1,043 16,691 
Purchased credit impaired loans— — — — — — 
Other acquired loans:
Beginning balance, July 1, 2022664 51 48 9 — 772 
Charge-offs(48)— — — — (48)
Recoveries— — 2 1 — 3 
Provision49 (2)(21)(1)(226)(201)
Total allowance on other acquired loans665 49 29 9 (226)526 
Total allowance on acquired loans665 49 29 9 (226)526 
Ending balance, September 30, 2022$13,782 $1,974 $512 $132 $817 $17,217 
Commercial/Agricultural Real EstateC&I/Agricultural operatingResidential MortgageConsumer InstallmentUnallocatedTotal
Nine months ended September 30, 2022
Allowance for Loan Losses:
Beginning balance, January 1, 2022$12,354 $1,959 $518 $225 $774 $15,830 
Charge-offs(157)(310)(35)(32)— (534)
Recoveries41 27 2 48 — 118 
Provision879 249 (2)(118)269 1,277 
Total allowance on originated loans$13,117 $1,925 $483 $123 $1,043 $16,691 
Purchased credit impaired loans— — — — — — 
Other acquired loans
Beginning balance, January 1, 2022856 69 130 28 — 1,083 
Charge-offs(48)— (33)(2)— (83)
Recoveries— — 27 1 — 28 
Provision(143)(20)(95)(18)(226)(502)
Total allowance on other acquired loans665 49 29 9 (226)526 
Total allowance on acquired loans665 49 29 9 (226)526 
Ending balance, September 30, 2022$13,782 $1,974 $512 $132 $817 $17,217 
Allowance for Loan Losses at September 30, 2022:
Amount of allowance for loan losses arising from loans individually evaluated for impairment$699 $— $— $— $— $699 
Amount of allowance for loan losses arising from loans collectively evaluated for impairment$13,083 $1,974 $512 $132 $817 $16,518 
Loans Receivable as of September 30, 2022
Ending balance of originated loans$982,555 $145,197 $80,664 $18,250 $— $1,226,666 
Ending balance of purchased credit-impaired loans5,785 578 908 — — 7,271 
Ending balance of other acquired loans110,577 15,073 20,518 294 — 146,462 
Ending balance of loans$1,098,917 $160,848 $102,090 $18,544 $— $1,380,399 
Ending balance: individually evaluated for impairment$18,698 $4,829 $6,290 $113 $— $29,930 
Ending balance: collectively evaluated for impairment$1,080,219 $156,019 $95,800 $18,431 $— $1,350,469 
Commercial/Agricultural Real EstateC&I/Agricultural operatingResidential MortgageConsumer InstallmentUnallocatedTotal
Allowance for Loan Losses at December 31, 2022:
Amount of allowance for loan losses arising from loans individually evaluated for impairment$519 $249 $48 $10 $— $826 
Amount of allowance for loan losses arising from loans collectively evaluated for impairment$13,566 $2,069 $551 $119 $808 $17,113 
Loans Receivable as of December 31, 2022:
Ending balance of originated loans$1,017,529 $150,239 $88,045 $17,130 $— $1,272,943 
Ending balance of purchased credit-impaired loans5,748 362 890 — — 7,000 
Ending balance of other acquired loans102,002 14,218 19,716 256 — 136,192 
Ending balance of loans$1,125,279 $164,819 $108,651 $17,386 $— $1,416,135 
Ending balance: individually evaluated for impairment$16,874 $3,292 $5,998 $755 $— $26,919 
Ending balance: collectively evaluated for impairment$1,108,405 $161,527 $102,653 $16,631 $— $1,389,216 
An aging analysis of the Company’s commercial/agricultural real estate, C&I, agricultural operating, residential mortgage, consumer installment and purchased third party loans as of September 30, 2023 and December 31, 2022, respectively, was as follows:
(Loan balances at amortized cost)30-59 Days Past Due and Accruing60-89 Days Past Due and AccruingGreater Than 89 Days Past Due and AccruingTotal
Past Due and Accruing		Nonaccrual LoansTotal Past Due Accruing and Nonaccrual LoansCurrentTotal
Loans
September 30, 2023
Commercial/Agricultural real estate:
Commercial real estate$523 $— $— $523 $10,570 $11,093 $737,025 $748,118 
Agricultural real estate36 — — 36 469 505 83,823 84,328 
Multi-family real estate— — — — — — 219,095 219,095 
Construction and land development— — — — 94 94 108,947 109,041 
C&I/Agricultural operating:
Commercial and industrial— 150 — 150 — 150 120,382 120,532 
Agricultural operating— — — — 1,373 1,373 23,198 24,571 
Residential mortgage:
Residential mortgage1,049 221 952 2,222 923 3,145 122,203 125,348 
Purchased HELOC loans117 — — 117 — 117 2,764 2,881 
Consumer installment:
Originated indirect paper70 — — 70 26 96 7,079 7,175 
Other consumer36 4 19 59 1 60 6,380 6,440 
Total $1,831 $375 $971 $3,177 $13,456 $16,633 $1,430,896 $1,447,529 
(Loan balances at unpaid principal balance)30-59 Days Past Due and Accruing60-89 Days Past Due and AccruingGreater Than 89 Days Past Due and AccruingTotal
Past Due and Accruing		Nonaccrual LoansTotal Past Due Accruing and Nonaccrual LoansCurrentTotal
Loans
December 31, 2022
Commercial/Agricultural real estate:
Commercial real estate$202 $88 $— $290 $5,736 $6,026 $719,945 $725,971 
Agricultural real estate4,992 — — 4,992 2,742 7,734 80,174 87,908 
Multi-family real estate— — — — — — 208,908 208,908 
Construction and land development3,975 — — 3,975 — 3,975 98,517 102,492 
C&I/Agricultural operating:
Commercial and industrial— 26 — 26 552 578 135,435 136,013 
Agricultural operating826 — — 826 890 1,716 27,090 28,806 
Residential mortgage:
Residential mortgage767 479 236 1,482 1,253 2,735 102,654 105,389 
Purchased HELOC loans— — — — — — 3,262 3,262 
Consumer installment:
Originated indirect paper15 — — 15 27 42 10,194 10,236 
Other consumer39 2 10 51 4 55 7,095 7,150 
Total $10,816 $595 $246 $11,657 $11,204 $22,861 $1,393,274 $1,416,135 
Nonaccrual Loans - The following table presents the amortized cost basis of loans on nonaccrual status and of nonaccrual loans individually evaluated at September 30, 2023 with no allowance for credit losses and interest income that would have been recorded under the original terms of such nonaccrual loans:
September 30, 2023Total Nonaccrual LoansNonaccrual with no Allowance for Credit LossesInterest Income Not Recorded for Nonaccrual loans
Commercial/Agricultural real estate:
Commercial real estate$10,570 $10,556 $723 
Agricultural real estate469 469 70 
Multi-family real estate— — — 
Construction and land development94 94 1 
C&I/Agricultural operating:
Commercial and industrial— — — 
Agricultural operating1,373 1,373 108 
Residential mortgage:
Residential mortgage923 685 44 
Purchased HELOC loans— — — 
Consumer installment:
Originated indirect paper26 26 1 
Other consumer1 1 — 
Total $13,456 $13,204 $947 
The Company’s policy is to discontinue the accrual of interest income on all loans for which principal or interest is past due according to the following schedules:
•Commercial/agricultural real estate loans, past due 90 days or more;
•Commercial and industrial/agricultural operating loans past due 90 days or more;
•Closed ended consumer installment loans past due 120 days or more; and
•Residential mortgage and open ended consumer installment loans past due 180 days or more.
The accrual of interest is discontinued earlier when, in the opinion of management, there is reasonable doubt as to the timely collection of interest or principal. Once interest accruals are discontinued, accrued but uncollected interest is charged against current year income. Subsequent receipts on non-accrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Interest on loans determined to be modified is recognized on an accrual basis in accordance with the restructured terms if the loan is in compliance with the modified terms. Nonaccrual loans are returned to accrual status when, in the opinion of management, the financial position of the borrower indicates there is no longer any reasonable doubt as to the timely collection of interest or principal. The Company requires a period of satisfactory performance of not less than six months before returning a nonaccrual loan to accrual status.
The amount of interest income recognized by the Company for the three and nine months ended September 30, 2023, due to nonaccrual loan payoffs was $420 and $505, respectively.
Collateral Dependent Loans - A loan is considered to be collateral dependent when, based upon management’s assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. For collateral dependent loans, expected credit losses are based on the fair value of the collateral at the balance sheet date, with consideration for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. The following table presents the amortized cost basis of collateral dependent loans by portfolio segment and collateral type that were individually evaluated to determine expected credit losses and the related allowance for credit losses as of September 30, 2023.
Collateral Type
September 30, 2023Real EstateOther AssetsTotalWithout an AllowanceWith an AllowanceAllowance Allocation
Commercial/Agricultural real estate:
Commercial real estate$11,604 $— $11,604 $11,590 $14 $13 
Agricultural real estate6,900 — 6,900 6,900 — — 
Multi-family real estate— — — — — — 
Construction and land development206 — 206 206 — — 
C&I/Agricultural operating:
Commercial and industrial— 2,970 2,970 2,970 — — 
Agricultural operating— 1,373 1,373 1,373 — — 
Residential mortgage:
Residential mortgage3,094 — 3,094 2,722 372 80 
Purchased HELOC loans— — — — — — 
Consumer installment:
Originated indirect paper— 40 40 40 — — 
Other consumer— 27 27 27 — — 
Total $21,804 $4,410 $26,214 $25,828 $386 $93 
There were no outstanding commitments to borrowers experiencing financial difficulty as of September 30, 2023. There were unused lines of credit totaling $37 on loans with borrowers experiencing financial difficulties as of September 30, 2023.
At December 31, 2022, the Company individually evaluated loans for impairment with a recorded investment of $26,823, consisting of (1) $7,000 PCI loans, with a carrying amount of $6,904; (2) $7,018 TDR loans, net of TDR PCI loans; and (3) $12,901 of substandard non-TDR, non-PCI loans. The $26,823 recorded investment of loans individually evaluated for impairment includes $5,171 of performing TDR loans. A loan is identified as impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. Performing TDRs consist of loans that have been modified and are performing in accordance with the modified terms for a sufficient length of time, generally six months, or loans that were modified on a proactive basis.
A summary of the Company’s loans individually evaluated for impairment as of December 31, 2022 and September 30, 2022 was as follows:
Twelve Months Ended
 Recorded InvestmentUnpaid Principal BalanceRelated AllowanceAverage Recorded InvestmentInterest Income Recognized
December 31, 2022
With No Related Allowance Recorded:
Commercial/Agricultural real estate$9,741 $9,766 $— $13,657 $549 
C&I/Agricultural operating2,744 2,754 — 4,467 200 
Residential mortgage5,846 5,907 — 6,304 276 
Consumer installment745 745 — 307 5 
Total$19,076 $19,172 $— $24,735 $1,030 
With An Allowance Recorded:
Commercial/Agricultural real estate$7,108 $7,108 $519 $6,028 $273 
C&I/Agricultural operating538 538 249 273 48 
Residential mortgage91 91 48 298 65 
Consumer installment10 10 10 2 2 
Total$7,747 $7,747 $826 $6,601 $388 
December 31, 2022 Totals
Commercial/Agricultural real estate$16,849 $16,874 $519 $19,685 $822 
C&I/Agricultural operating3,282 3,292 249 4,740 248 
Residential mortgage5,937 5,998 48 6,602 341 
Consumer installment755 755 10 309 7 
Total$26,823 $26,919 $826 $31,336 $1,418 
Three Months EndedNine Months Ended
 Recorded InvestmentUnpaid Principal BalanceRelated AllowanceAverage Recorded InvestmentInterest Income RecognizedAverage Recorded InvestmentInterest Income Recognized
September 30, 2022
With No Related Allowance Recorded:
Commercial/Agricultural real estate$12,002 $12,038 $— $12,646 $105 $14,636 $410 
C&I/Agricultural operating4,710 4,829 — 4,478 57 4,898 139 
Residential mortgage6,229 6,290 — 5,957 85 6,419 218 
Consumer installment113 113 — 138 1 198 5 
Total $23,054 $23,270 $— $23,219 $248 $26,151 $772 
With An Allowance Recorded:
Commercial/Agricultural real estate$6,660 $6,660 $699 $6,232 $81 $5,758 $95 
C&I/Agricultural operating— — — — — 207 10 
Residential mortgage— — — 101 — 350 2 
Consumer installment— — — — — 1 — 
Total$6,660 $6,660 $699 $6,333 $81 $6,316 $107 
September 30, 2022
Commercial/Agricultural real estate$18,662 $18,698 $699 $18,878 $186 $20,394 $505 
C&I/Agricultural operating4,710 4,829 — 4,478 57 5,105 149 
Residential mortgage6,229 6,290 — 6,058 85 6,769 220 
Consumer installment113 113 — 138 1 199 5 
Total$29,714 $29,930 $699 $29,552 $329 $32,467 $879 
The tables below detail Loan Modifications Made to Borrowers Experiencing Financial Difficulty during the three months ended September 30, 2023:

Term Extension
Loan ClassAmortized Cost Basis at
September 30, 2023		% of Total Class of Financing Receivables
Commercial real estate$4,826 0.65 %


The following tables describe the financial effect of the modifications made to borrowers experiencing financial difficulty during the three months ended September 30, 2023:
Term Extension
Loan ClassFinancial Effect
Commercial real estateA weighted average of 20 months was added to the term of the loans

The tables below detail Loan Modifications Made to Borrowers Experiencing Financial Difficulty during the nine months ended September 30, 2023:

Term Extension
Loan ClassAmortized Cost Basis at
September 30, 2023		% of Total Class of Financing Receivables
Commercial real estate$4,826 0.65 %
Agricultural operating$179 0.73 %
Residential mortgage$36 0.03 %
Other-Than-Insignificant Payment Delay
Loan ClassAmortized Cost Basis at
September 30, 2023		% of Total Class of Financing Receivables
Residential mortgage$69 0.06 %
Other consumer$20 0.31 %
The following tables describe the financial effect of the modifications made to borrowers experiencing financial difficulty during the nine months ended September 30, 2023:
Term Extension
Loan ClassFinancial Effect
Commercial real estateA weighted average of 20 months was added to the term of the loans
Agricultural operatingA weighted average of 3 months was added to the term of the loans
Residential mortgageA weighted average of 17 months was added to the term of the loans
Other-Than-Insignificant Payment Delay
Loan ClassFinancial Effect
Residential mortgagePayments were deferred a weighted average of 6 months
Other consumerPayments were deferred a weighted average of 3 months

The Company closely monitors the performance of loans that have been modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. No loan modified during the three and nine months ended September 30, 2023 has subsequently defaulted. The following table shows the performance of such loans that have been modified during the nine months ended September 30, 2023.
Current30-59 Days Past Due60-89 Days Past DueGreater Than 89 Days Past Due
Commercial real estate$4,826 $— $— $— 
Agricultural operating179 
Residential mortgage105 — — — 
Other consumer20 — — — 
Total$5,130 $— $— $— 
Troubled Debt Restructuring – A TDR includes a loan modification where a borrower is experiencing financial difficulty, and the Bank grants a concession to that borrower that the Bank would not otherwise consider, except for the borrower’s financial difficulties. Concessions may include: extension of the loan’s term, renewals of existing balloon loans, reductions in interest rates and consolidating existing Bank loans at modified terms. A TDR may be either on accrual or nonaccrual status based upon the performance of the borrower and management’s assessment of collectability. If a TDR is placed on nonaccrual status, it remains there until a sufficient period of performance under the restructured terms has occurred at which time it is returned to accrual status. There was one accruing, delinquent TDR loan greater than 60 days past due, with a recorded investment of $15 at December 31, 2022.
Following is a summary of TDR loans by accrual status as of December 31, 2022.
December 31, 2022
Troubled debt restructure loans:
Accrual status$5,171 
Non-accrual status2,617 
Total$7,788 
There was one TDR commitment totaling $26 meeting our TDR criteria as of December 31, 2022. There were unused lines of credit totaling $484 meeting our TDR criteria as of December 31, 2022.

The following provides detail, including specific reserve and reasons for modification, related to loans identified as TDRs during the three and nine months ended September 30, 2022:    
Number of ContractsMaturity ExtensionModified PaymentModified Under- writingOtherPre-Modification Outstanding Recorded InvestmentPost-Modification Outstanding Recorded InvestmentSpecific Reserve
Three months ended September 30, 2022
TDRs:
Commercial/Agricultural real estate2 $— $— $1,539 $— $1,539 $1,539 $— 
C&I/Agricultural operating2 1,424 — 140 — 1,564 1,564 — 
Residential mortgage3 7 147 — — 154 154 — 
Consumer installment— — — — — — — — 
Totals7 $1,431 $147 $1,679 $— $3,257 $3,257 $— 
Number of ContractsMaturity ExtensionModified PaymentModified Under- writingOtherPre-Modification Outstanding Recorded InvestmentPost-Modification Outstanding Recorded InvestmentSpecific Reserve
Nine months ended September 30, 2022
TDRs:
Commercial/Agricultural real estate7 $1,241 $— $1,964 $— $3,205 $3,205 $— 
C&I/Agricultural operating5 1,424 — 736 — 2,160 2,160 — 
Residential mortgage9 70 147 507 — 724 724 — 
Consumer installment— — — — — — — — 
Totals21 $2,735 $147 $3,207 $— $6,089 $6,089 $— 
There were no loans modified in a TDR during the previous twelve months which subsequently defaulted during the three and nine months ended September 30, 2022.