3. Loans & Leases and Allowance for Credit Losses

The following tables show the allocation of the allowance for credit losses by portfolio segment and by impairment methodology at the dates indicated (in thousands):

June 30, 2018	Commercial Real Estate			Agricultural Real Estate		Real Estate Construction			Residential 1st Mortgages			Home Equity Lines & Loans			Agricultural			Commercial			Consumer & Other			Leases		Unallocated			Total

Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2018	$	10,922		$	12,085	$	1,846		$	815		$	2,324		$	8,159		$	9,197		$	209		$	3,363	$	1,422		$	50,342
Charge-Offs		-			-		-			(12	)		(4	)		-			(14	)		(58	)		-		-			(88	)
Recoveries		-			-		-			6			2			13			3			26			-		-			50
Provision		(139	)		1,229		(230	)		55			226			(514	)		250			93			37		(174	)		833
Ending Balance- June 30, 2018	$	10,783		$	13,314	$	1,616		$	864		$	2,548		$	7,658		$	9,436		$	270		$	3,400	$	1,248		$	51,137
Second Quarter Allowance for Credit Losses:
Beginning Balance- April 1, 2018	$	11,078		$	12,242	$	1,873		$	827		$	2,343		$	7,868		$	9,374		$	239		$	3,390	$	1,443		$	50,677
Charge-Offs		-			-		-			(12	)		-			-			(14	)		(41	)		-		-			(67	)
Recoveries		-			-		-			3			1			7			1			15			-		-			27
Provision		(295	)		1,072		(257	)		46			204			(217	)		75			57			10		(195	)		500
Ending Balance- June 30, 2018	$	10,783		$	13,314	$	1,616		$	864		$	2,548		$	7,658		$	9,436		$	270		$	3,400	$	1,248		$	51,137
Ending Balance Individually Evaluated for Impairment		333			-		-			131			16			-			487			7			-		-			974
Ending Balance Collectively Evaluated for Impairment		10,450			13,314		1,616			733			2,532			7,658			8,949			263			3,400		1,248			50,163
Loans & Leases:
Ending Balance	$	752,043		$	540,852	$	94,223		$	261,804		$	37,669		$	273,170		$	286,651		$	7,390		$	90,646	$	-		$	2,344,448
Ending Balance Individually Evaluated for Impairment		4,749			-		-			2,628			324			-			2,290			7			-		-			9,998
Ending Balance Collectively Evaluated for Impairment	$	747,294		$	540,852	$	94,223		$	259,176		$	37,345		$	273,170		$	284,361		$	7,383		$	90,646	$	-		$	2,334,450

December 31, 2017	Commercial Real Estate			Agricultural Real Estate		Real Estate Construction			Residential 1st Mortgages			Home Equity Lines & Loans			Agricultural			Commercial		Consumer & Other			Leases			Unallocated			Total

Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2017	$	11,110		$	9,450	$	3,223		$	865		$	2,140		$	7,381		$	8,515	$	200		$	3,586		$	1,449		$	47,919
Charge-Offs		(109	)		-		-			(53	)		(3	)		(374	)		-		(146	)		-			-			(685	)
Recoveries		109			-		-			40			8			17			8		76			-			-			258
Provision		(188	)		2,635		(1,377	)		(37	)		179			1,135			674		79			(223	)		(27	)		2,850
Ending Balance- December 31, 2017	$	10,922		$	12,085	$	1,846		$	815		$	2,324		$	8,159		$	9,197	$	209		$	3,363		$	1,422		$	50,342
Ending Balance Individually Evaluated for Impairment		366			-		-			73			17			-			220		8			-			-			684
Ending Balance Collectively Evaluated for Impairment		10,556			12,085		1,846			742			2,307			8,159			8,977		201			3,363			1,422			49,658
Loans & Leases:
Ending Balance	$	684,961		$	499,231	$	100,206		$	260,751		$	34,525		$	273,582		$	265,703	$	6,656		$	89,680		$	-		$	2,215,295
Ending Balance Individually Evaluated for Impairment		4,822			-		-			2,373			340			-			1,734		10			-			-			9,279
Ending Balance Collectively Evaluated for Impairment	$	680,139		$	499,231	$	100,206		$	258,378		$	34,185		$	273,582		$	263,969	$	6,646		$	89,680		$	-		$	2,206,016

June 30, 2017	Commercial Real Estate			Agricultural Real Estate		Real Estate Construction			Residential 1st Mortgages			Home Equity Lines & Loans		Agricultural			Commercial		Consumer & Other			Leases			Unallocated			Total

Year-To-Date Allowance for Credit Losses:
Beginning Balance- January 1, 2017	$	11,110		$	9,450	$	3,223		$	865		$	2,140	$	7,381		$	8,515	$	200		$	3,586		$	1,449		$	47,919
Charge-Offs		(109	)		-		-			-			-		(7	)		-		(60	)		-			-			(176	)
Recoveries		10			-		-			19			5		-			4		33			-			-			71
Provision		231			815		(536	)		(12	)		25		(138	)		1,025		32			(634	)		442			1,250
Ending Balance- June 30, 2017	$	11,242		$	10,265	$	2,687		$	872		$	2,170	$	7,236		$	9,544	$	205		$	2,952		$	1,891		$	49,064
Second Quarter Allowance for Credit Losses:
Beginning Balance- April 1, 2017	$	11,665		$	9,393	$	2,946		$	880		$	2,125	$	6,511		$	8,479	$	198		$	3,866		$	2,337		$	48,400
Charge-Offs		-			-		-			-			-		-			-		(25	)		-			-			(25	)
Recoveries		3			-		-			16			3		-			-		17			-			-			39
Provision		(426	)		872		(259	)		(24	)		42		725			1,065		15			(914	)		(446	)		650
Ending Balance- June 30, 2017	$	11,242		$	10,265	$	2,687		$	872		$	2,170	$	7,236		$	9,544	$	205		$	2,952		$	1,891		$	49,064
Ending Balance Individually Evaluated for Impairment		468			-		-			61			15		322			266		6			-			-			1,138
Ending Balance Collectively Evaluated for Impairment		10,774			10,265		2,687			811			2,155		6,914			9,278		199			2,952			1,891			47,926
Loans & Leases:
Ending Balance	$	670,591		$	473,153	$	168,487		$	252,653		$	32,174	$	265,899		$	254,887	$	7,533		$	78,705		$	-		$	2,204,082
Ending Balance Individually Evaluated for Impairment		4,890			976		-			1,894			344		688			1,624		28			-			-			10,444
Ending Balance Collectively Evaluated for Impairment	$	665,701		$	472,177	$	168,487		$	250,759		$	31,830	$	265,211		$	253,263	$	7,505		$	78,705		$	-		$	2,193,638

The ending balance of loans individually evaluated for impairment includes restructured loans in the amount of $2.9 million at June 30, 2018, $3.0 million at December 31, 2017 and $3.2 million at June 30, 2017, which are no longer classified as TDRs.

The following tables show the loan & lease portfolio allocated by management’s internal risk ratings at the dates indicated (in thousands):

June 30, 2018	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	749,467	$	2,576	$	-	$	752,043
Agricultural Real Estate		524,259		10,521		6,072		540,852
Real Estate Construction		85,638		8,585		-		94,223
Residential 1st Mortgages		261,112		-		692		261,804
Home Equity Lines & Loans		37,622		-		47		37,669
Agricultural		266,837		5,050		1,283		273,170
Commercial		285,113		283		1,255		286,651
Consumer & Other		7,245		-		145		7,390
Leases		88,677		1,969		-		90,646
Total	$	2,305,970	$	28,984	$	9,494	$	2,344,448

December 31, 2017	Pass		Special Mention		Substandard		Total Loans
Loans & Leases:
Commercial Real Estate	$	677,636	$	6,843	$	482	$	684,961
Agricultural Real Estate		488,672		6,529		4,030		499,231
Real Estate Construction		90,728		9,478		-		100,206
Residential 1st Mortgages		259,795		41		915		260,751
Home Equity Lines and Loans		34,476		-		49		34,525
Agricultural		264,425		6,439		2,718		273,582
Commercial		260,565		4,610		528		265,703
Consumer & Other		6,498		-		158		6,656
Leases		87,497		2,183		-		89,680
Total	$	2,170,292	$	36,123	$	8,880	$	2,215,295

June 30, 2017	Pass		Special Mention		Substandard		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	664,606	$	4,491	$	1,494	$	670,591
Agricultural Real Estate		466,831		1,316		5,006		473,153
Real Estate Construction		160,112		8,375		-		168,487
Residential 1st Mortgages		252,252		44		357		252,653
Home Equity Lines & Loans		32,174		-		-		32,174
Agricultural		256,026		6,302		3,571		265,899
Commercial		249,173		5,128		586		254,887
Consumer & Other		7,341		-		192		7,533
Leases		76,313		2,392		-		78,705
Total	$	2,164,828	$	28,048	$	11,206	$	2,204,082

See “Note 1. Significant Accounting Policies - Allowance for Credit Losses” for a description of the internal risk ratings used by the Company. There were no loans or leases outstanding at June 30, 2018, December 31, 2017, and June 30, 2017, rated doubtful or loss.

The following tables show an aging analysis of the loan & lease portfolio by the time past due at the dates indicated

(in thousands):

June 30, 2018	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	-	$	-	$	-	$	-	$	-	$	752,043	$	752,043
Agricultural Real Estate		-		-		-		-		-		540,852		540,852
Real Estate Construction		277		-		-		-		277		93,946		94,223
Residential 1st Mortgages		107		-		-		130		237		261,567		261,804
Home Equity Lines & Loans		19		-		-		-		19		37,650		37,669
Agricultural		-		-		-		-		-		273,170		273,170
Commercial		-		-		-		599		599		286,052		286,651
Consumer & Other		6		-		-				6		7,384		7,390
Leases		-		-		-				-		90,646		90,646
Total	$	409	$	-	$	-	$	729	$	1,138	$	2,343,310	$	2,344,448

December 31, 2017	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	-	$	-	$	-	$	-	$	-	$	684,961	$	684,961
Agricultural Real Estate		-		-		-		-		-		499,231		499,231
Real Estate Construction		-		-		-		-		-		100,206		100,206
Residential 1st Mortgages		448		-		-		-		448		260,303		260,751
Home Equity Lines and Loans		10		-		-		-		10		34,515		34,525
Agricultural		-		-		-		-		-		273,582		273,582
Commercial		180		-		-		-		180		265,523		265,703
Consumer & Other		7		-		-		-		7		6,649		6,656
Leases		-		-		-		-		-		89,680		89,680
Total	$	645	$	-	$	-	$	-	$	645	$	2,214,650	$	2,215,295

June 30, 2017	30-59 Days Past Due		60-89 Days Past Due		90 Days and Still Accruing		Nonaccrual		Total Past Due		Current		Total Loans & Leases
Loans & Leases:
Commercial Real Estate	$	-	$	-	$	143	$	-	$	143	$	670,448	$	670,591
Agricultural Real Estate		-		-		-		976		976		472,177		473,153
Real Estate Construction		-		-		-		-		-		168,487		168,487
Residential 1st Mortgages		-		-		-		56		56		252,597		252,653
Home Equity Lines & Loans		36		-		-		-		36		32,138		32,174
Agricultural		-		-		-		306		306		265,593		265,899
Commercial		-		-		-		-		-		254,887		254,887
Consumer & Other		23		-		-		24		47		7,486		7,533
Leases		-		-		-		-		-		78,705		78,705
Total	$	59	$	-	$	143	$	1,362	$	1,564	$	2,202,518	$	2,204,082

The following tables show information related to impaired loans & leases for the periods indicated (in thousands):

							Three Months Ended June 30, 2018				Six Months Ended June 30, 2018
June 30, 2018	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	100	$	100	$	-	$	101	$	2	$	102	$	4
Residential 1st Mortgages		-		-		-		452		-		680		8
	$	100	$	100	$	-	$	553	$	2	$	782	$	12
With an allowance recorded:
Commercial Real Estate	$	2,938	$	2,927	$	333	$	2,947	$	24		2,956	$	48
Residential 1st Mortgages		1,698		1,877		85		1,141		13		844		20
Home Equity Lines & Loans		76		86		3		77		1		77		2
Commercial		2,297		2,290		487		2,009		15		1,870		30
Consumer & Other		7		8		7		8		-		8		-
	$	7,016	$	7,188	$	915	$	6,182	$	53		5,755	$	100
Total	$	7,116	$	7,288	$	915	$	6,735	$	55	$	6,537	$	112

December 31, 2017	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	104	$	104	$	-	$	107	$	11
Agricultural Real Estate		-		-		-		488		-
Residential 1st Mortgages		911		1,012		-		532		11
Home Equity Lines and Loans		-		-		-		16		-
Agricultural		-		-		-		30		-
	$	1,015	$	1,116	$	-	$	1,173	$	22
With an allowance recorded:
Commercial Real Estate	$	2,973	$	2,961	$	366	$	2,999	$	104
Residential 1st Mortgages		508		571		25		469		16
Home Equity Lines and Loans		73		89		4		74		3
Agricultural		-		-		-		409		21
Commercial		1,741		1,734		220		1,693		59
Consumer & Other		8		9		8		11		-
	$	5,303	$	5,364	$	623	$	5,655	$	203
Total	$	6,318	$	6,480	$	623	$	6,828	$	225

							Three Months Ended June 30, 2017				Six Months Ended June 30, 2017
June 30, 2017	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial Real Estate	$	108	$	109	$	-	$	109	$	3	$	128	$	7
Agricultural Real Estate		976		983		-		976		-		1,059		-
Residential 1st Mortgages		406		462		-		410		3		421		3
Home Equity Lines & Loans		-		-		-		32		-		32		-
Agricultural		59		65		-		60		-		45		-
Commercial		-		-		-		-		-		756		-
	$	1,549	$	1,619	$	-	$	1,587	$	6	$	2,441	$	10
With an allowance recorded:
Commercial Real Estate	$	3,008	$	2,994	$	467	$	3,016	$	25	$	2,264	$	55
Residential 1st Mortgages		424		463		20		425		4		427		9
Home Equity Lines & Loans		51		58		3		70		1		80		2
Agricultural		630		631		322		634		6		633		14
Commercial		1,631		1,623		266		1,636		14		1,589		30
Consumer & Other		24		31		6		15		-		11		-
	$	5,768	$	5,800	$	1,084	$	5,796	$	50	$	5,004	$	110
Total	$	7,317	$	7,419	$	1,084	$	7,383	$	56	$	7,445	$	120

Total recorded investment shown in the prior table will not equal the total ending balance of loans & leases individually evaluated for impairment on the allocation of allowance table. This is because this table does not include impaired loans that were previously modified in a troubled debt restructuring, are currently performing and are no longer disclosed or classified as TDR’s.

At June 30, 2018, the Company allocated $624,000 of specific reserves to $6.4 million of troubled debt restructured loans & leases, all of which were performing. The Company had no commitments at June 30, 2018 to lend additional amounts to customers with outstanding loans or leases that are classified as TDRs.

During the three and six-month periods ending June 30, 2018, there was one loan modified as a troubled debt restructuring.

The modification involved a reduction of the stated interest rate of the loan for 5 years and extended the maturity date for 10 years.

	Three Months Ended June 30, 2018						Six Months Ended June 30, 2018
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Residential 1st Mortgages		1	$	175	$	163		1	$	175	$	163
Total		1	$	175	$	163		1	$	175	$	163

During the three and six-months ended June 30, 2018, the twelve months ended December 31, 2017, and the three and six-month periods ending June 30, 2017 there were no payment defaults on loans or leases modified as troubled debt restructurings within twelve months following the modification. The Company considers a loan or lease to be in payment default once it is greater than 90 days contractually past due under the modified terms.

At December 31, 2017, the Company allocated $623,000 of specific reserves to $6.3 million of troubled debt restructured loans, all of which were performing. The Company had no commitments at December 31, 2017 to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.

During the period ending December 31, 2017, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan.

Modifications involving a reduction of the stated interest rate of the loan ranged from 3 to 5 years. Modifications involving an extension of the maturity date ranged from 3 to 10 years.

The following table presents loans by class modified as troubled debt restructured loans for the period ended December 31, 2017 (in thousands):

	December 31, 2017
Troubled Debt Restructurings	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Residential 1st Mortgages		2		673		630
Home Equity Lines and Loans		1		32		32
Commercial		2		138		138
Consumer & Other		1		9		8
Total		6	$	852	$	808

At June 30, 2017, the Company allocated $831,000 of specific reserves to $6.0 million of troubled debt restructured loans & leases, all of which were performing. The Company had no commitments at June 30, 2017 to lend additional amounts to customers with outstanding loans or leases that are classified as TDRs.

During the three and six-month periods ending June 30, 2017, there were no loans & leases modified as a troubled debt restructuring.